U.S. House of Representatives: Committee on Energy and Commerce, Republicans Prepared Witness Testimony: Palmisano, Donald J.

Prepared Witness Testimony

The House Committee on Energy and Commerce

Subcommittee on Oversight and Investigations
February 10, 2003
10:00 AM
St. Mary Medical Center, Sister Claire Carty Auditorium, Langhorne-Newtown Roads, Langhorne, Pennsylvania

On behalf of the physician members of the American Medical Association (AMA), I appreciate the opportunity to testify before you today regarding an issue that is seriously threatening the availability of and access to quality health care for patients. I would especially like to express our thanks to Representative Jim Greenwood (R-PA) for his continued leadership on this issue. Introduction of H.R. 4600 in the 107th Congress and H.R. 5 in the current session have provided a much needed focus for action at the national level.

Mr. Chair, you know there is something terribly wrong when thousands of physicians in the state to our east (New Jersey) feel compelled to leave their patients, to leave the work they love doing, and stand in the rain in Trenton just to get noticed. There is something terribly wrong when patients have to by-pass the nearest hospital because the specialists who used to care for them have stopped practicing, eliminated certain procedures, or moved out of state because of the liability mess. There is something terribly wrong when dedicated professionals, who have trained for years, want to give up the work of a lifetime and retire. There is something terribly wrong when medical students make decisions about residency training based upon the legal climate in various states.

As you have recognized, the time for action is past due. Physicians across the country are making decisions now and more and more patients are wondering, will their doctor be there. We must act now to fix our broken medical liability system.

OVERVIEW

In his State of the Union Address two weeks ago, President Bush stressed that we all are threatened by a legal system that is out of control. The President stated that "Because of excessive litigation, everybody pays more for health care and many parts of America are losing fine doctors." The President's remarks are substantiated in several recent government and private sector reports-reports making clear that the medical liability litigation system in the United States has evolved into a "lawsuit lottery," where a few patients and their lawyers receive astronomical awards and the rest of society pays the price as access to health care professionals and services are reduced.

The crisis facing our nation's medical liability system has not waned-in fact, it is getting worse. Escalating jury awards and the high cost of defending against lawsuits, even frivolous ones, have caused medical liability insurance premiums to reach unprecedented levels. As a result, a growing number of physicians can no longer find or afford liability insurance.

Virtually every day for the past year there has been at least one major media story on the plight of American patients and physicians as the liability crisis reaches across the country. Access to health care is now seriously threatened in states such as Florida, Georgia, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and West Virginia. And, a crisis is looming in more than 30 other states. Emergency departments are losing staff and scaling back certain services such as trauma units. Many obstetrician/gynecologists and family physicians have stopped delivering babies, and some advanced and high-risk procedures (such as neurosurgery) are being postponed because physicians can no longer afford or even find the liability insurance they need to practice.

We must bring common sense back to our court rooms so that patients have access to their emergency rooms, delivery rooms, operating rooms, and physicians' offices.

THE LITIGATION SYSTEM IS CAUSING THE CRISIS

The primary cause of the growing liability crisis is the unrestrained escalation in jury awards that are a part of a legal system that in many states is simply out of control. While there have been several articles published since the mid-1990s indicating that increases in jury awards lead to higher liability premiums, in the last year a growing number of government and private sector reports show that increasing medical liability premiums are being driven primarily by increases in lawsuit awards and litigation expenses.

According to 2001 Jury Verdict Research data, in just a one year period (between 1999 and 2000), the median jury award increased 43 percent. Further, median jury awards for medical liability claims grew at 7 times the rate of inflation, while settlement payouts grew at nearly 3 times the rate of inflation. Even more telling, however, is that the proportion of jury awards topping $1 million increased from 34 percent in 1996 to 52 percent in 2000. More than half of all jury awards today top $1 million, and the average jury award has increased to about $3.5 million.

In a July 2002 report prepared by the U.S. Department of Health and Human Services (HHS), the federal government concluded that the excesses of the litigation system are threatening patients' access to health care. HHS reports that insurance premiums are largely determined by the litigation system. The report states that the litigation system is inherently costly, unpredictable, and slow to resolve claims. The cost just to defend a claim averages over $24,000. The fact that about 70 percent of claims end with no payment to the patient indicates the degree to which substantial economic resources are being diverted from patient care to fruitless legal wrangling.

Even when there is a large award in favor of an injured patient, a large percentage of the award never reaches the patient. Attorney contingent fees, added with court costs, expert witness costs, and other "overhead" costs, can consume 40-50 percent of the compensation meant to help the patient.

On September 25, 2002, HHS issued an update on the medical liability crisis. This update reported on the results of a survey conducted by Medical Liability Monitor (MLM), an independent reporting service that tracks medical professional liability trends and issues. According to MLM, the survey determined that the crisis identified in HHS's July report had become worse. HHS reported that:

The cost of the excesses of the litigation system are reflected in the rapid increases in the cost of malpractice insurance coverage. Premiums are spiking across all specialties in 2002. When viewed alongside previous double-digit increases in 2000 and 2001, the new information further demonstrates that the litigation system is threatening health care quality for all Americans as well as raising the costs of health care for all Americans.

The update further highlighted that liability insurance rates are escalating faster in states that have not established reasonable limits on unquantifiable and arbitrary non-economic damages. HHS reported that:

. . . 2001 premium increases in states without litigation reform ranged from 30%-75%. In 2002, the situation has deteriorated. States without reasonable limits on non-economic damages have experienced the largest increases by far, with increases of between 36%-113% in 2002. States with reasonable limits on non-economic damages have not experienced the same rate spiking.

HHS also compared the range of physician liability insurance premiums for certain specialties in California, which has established reasonable limits on awards for non-economic damages, to the premiums in states that have not enacted similar limits. The results reveal how excessive awards for non-economic damages affect premiums. For example, in 2002 OB/GYNs in California paid up to $72,000. In Florida, which does not limit non-economic damage awards, OB/GYNs paid up to $211,000.

In Florida, as indicated in the example just given, medical liability premiums are among the highest in the nation. The situation in Florida has become so dire that Governor Bush created a special Task Force to examine the availability and affordability of liability insurance. This Task Force held ten hearings over a five month period and received extensive testimony and information from numerous, diverse sources.

Among the many findings in its report released on January 29, 2003, the Governor's Task Force found that the level of liability claims paid was the main cause of the increases in medical liability insurance rates. The Task Force ultimately concluded that "the centerpiece and the recommendation that will have the greatest long-term impact on healthcare provider liability insurance rates, and thus eliminate the crisis of availability and affordability of healthcare in Florida, is a $250,000 cap on non-economic damages."

Further, a 2002 Congressional Budget Office study on H.R. 4600 (107th Congress), which included a limitation on non-economic damages, asserts that:

CBO's analysis indicated that certain tort limitations, primarily caps on awards and rules governing offsets from collateral-source benefits, effectively reduce average premiums for medical malpractice insurance. Consequently, CBO estimates that, in states that currently do not have controls on malpractice torts, H.R. 4600 would significantly lower premiums for medical malpractice insurance from what they would otherwise be under current law.

These are just a few examples of growing evidence that reveal that out-of-control jury awards are inexorably linked to the severe increases in medical liability insurance premiums. It is clear that corrective action through federal legislation is urgently needed.

Public Citizen and other trial lawyer supported groups claim that soaring medical liability insurance premiums are the result of declining investments in the insurance industry, and that liability reforms do not stabilize the insurance market. Beyond the reports discussed above, several authoritative and credible studies reveal Public Citizen's claims to be misleading, based on flawed analysis, and contrary to the facts.

The report on which Public Citizen bases most of its speculations, produced under the direction of J. Robert Hunter for the advocacy group Americans for Insurance Reform (AIR), is flawed in a number of ways. The AIR/Hunter study purports to prove that there is no current explosion in medical liability insurance payouts, and that the explosion in medical liability insurance premiums is due to the insurance underwriting cycle. While medical liability insurance premiums, medical liability award payouts, and tort law factors differ across states, the premium and payout data presented in AIR's report are at the national level. One cannot use national data to draw valid conclusions about how state-specific changes in premiums may be related to state-specific changes in payouts. Conclusions about what has or has not caused recent premium escalation without accounting for the state-level factors listed above are unsupportable.

Last month, Brown Brothers Harriman & Co. (BBH) released a report ("Did Investments Affect Medical Malpractice Premiums?") that analyzed the impact of insurers' asset allocation and investment income on the premiums they charge. BBH concluded that there is no correlation between the premiums charged by the medical liability insurance industry, on the one hand, and the industry's investment yield, the performance of the U.S. economy, or interest rates, on the other hand. In addition, on February 4, 2003, BBH released an addendum to this study that analyzed National Association of Insurance Commissioners (NAIC) data to determine whether investment gains by medical liability insurance companies declined in the recent bear market. BBH asked the question: "Did medical malpractice companies raise premiums because they had come to expect a certain percentage gain that was not achieved due to market conditions?" BBH determined that the decline in equities (which are a small percentage of insurance company investments) was more than offset by the capital gains by bonds (which make up a substantial part of insurance company investments) due to a decline in interest rates. BBH concluded that "investments did not precipitate the current crisis."

BBH's findings are corroborated by other recent reports. On September 25, 2002, HHS released an update on the medical liability crisis addressing claims by trial lawyers that the crisis is caused by the management practices of the insurance industry. HHS concluded that such claims are not supported by facts, stating "Comparisons of states with and without meaningful medical liability reforms provide clear evidence that the broken medical litigation system is responsible." A summary of medical liability insurer annual statement data in AM Best's Aggregates & Averages, Property-Casualty, 2002 edition shows that the investment yields of medical malpractice insurers have been stable and positive since 1997. AM Best reports that medical liability insurers have approximately 80% of their investments in the bond market. Recent NAIC data show that physicians' medical liability insurance premiums between 1976-2000 have risen 167% in California (which established effective liability reforms in 1975) compared to 505% in the rest of the United States.

Public Citizen's misdirected claims are a disservice to patients who are losing access to health care services, and an affront to the physicians and other health care professionals who dedicate their lives to healing and caring for the sick and working to find ways to improve the quality of care. America's medical liability crisis is too serious and the consequences of inaction too grave for the public and Congress to use anything but the facts to make decisions about reform. In short, Public Citizen's claims are counterproductive to the debate on resolving the medical liability crisis.

ACCESS TO CARE IS AT RISK

The most troubling aspect of the current medical liability litigation system is its impact on patients. Unbridled lawsuits have turned some regions in our country-and in several cases entire states-into risky areas to be sick, because it is so risky to practice medicine. Due to large jury awards and the burgeoning costs of defending against lawsuits (including frivolous claims), medical liability insurance premiums are skyrocketing. As insurance becomes unaffordable or unavailable, physicians are being forced to leave their practices, stop performing high-risk procedures, or drop vital services-all of which seriously impede patient access to care.

Four states-Pennsylvania, Florida, West Virginia, and New Jersey-illustrate the crisis many states are experiencing and the problems many other states will face if effective tort reforms are not enacted.

PENNSYLVANIA

Dr. Anthony Clay never thought he would have to leave Philadelphia. He has spent his whole life there-growing up and attending college, medical school, and residency to become a cardiologist. He treats families he has known since boyhood. He likes knowing where his patients live, work, and shop. All nine of his siblings still live there. But, Dr. Clay is leaving his practice in Philadelphia this spring because of surging malpractice insurance rates. He is starting over in Delaware, where his insurance costs will drop from roughly $70,000 a year to $8,000. "It's been terrible," said Dr. Clay, 40. "In this field, you've been with the patient, and also the family, in some of their most life-defining moments - in the throes of a heart attack with no blood pressure. Wrongly or rightly, the patient credits you with being there when they weren't doing so well. You realize you've created a bond. I take that very seriously." (Baltimore Sun, February 5, 2003).
Brian Holmes, MD, is only one of an estimated 18 percent of Pennsylvania neurosurgeons to have left the state, retired, or limited their practices because of the medical liability crisis. "It saddened me to move, but I had no choice. It was either move or go out of business." (Philadelphia Business Journal, Sept. 25, 2002).
After 25 years of practice, OB/GYN Michael Horn, MD, stopped delivering babies in 2002 because of the fear of getting sued. "It's just the potential, the not knowing if someone will seek an outlandish reward. I don't want to expose myself or my family." (Burlington County Times, Oct. 2, 2002).
Medical students are less likely to seek residencies in Philadelphia, and residents are less likely to stay and practice in the area because of "prohibitively high" medical liability insurance rates, according to Jefferson Medical College professor Stephen L. Schwartz, MD. (Associated Press, Oct. 4, 2002).
OB/GYN Lawrence Glad, MD, used to deliver about 500 babies a year-40 percent of all the babies born in Fayette County annually. After his premiums skyrocketed from $57,000 to $135,000, however, he closed his practice in the fall of 2002. (Pittsburgh Business Times, Nov. 18, 2002).
Mercy Hospital chief of surgery Charles Bannon, MD, has watched numerous physicians leave Scranton and Lackawanna County-creating a shortage of surgeons, fewer medical school applications and residencies. "It will take generations to get back the quality of medicine in Philadelphia." (Scranton Times, Nov. 20, 2002).

FLORIDA

Women are facing waiting lists of four months before being able to get an appointment for a mammogram because at least six mammography centers in South Florida alone have stopped offering the procedure as a result of increasing medical liability insurance premiums. "This trend is troubling. There are a growing number of older people and less and less people to provide mammograms," said Jolean McPherson, a Florida spokeswoman for the American Cancer Society. (South Florida Sun Sentinel, Nov. 4, 2002).
Aventura Hospital in South Florida closed its maternity ward and cited $1,000 in insurance premiums for each delivery as the prime factor. Aventura is one of six maternity wards to close in recent months. Now, patients will be forced to drive to other counties and other facilities. "There may be waits getting into a labor-room floor," said OB/GYN Aaron Elkin, MD. (Miami Herald, Oct. 19, 2002).
"Without a doubt, access to health coverage is being affected. Some of our emergency rooms are losing their effectiveness," said Dr. Greg Zorman, neurosurgery chief at Memorial Regional Hospital in Hollywood. His unit gets several patients a week from smaller ERs that have lost neurosurgery coverage. (South Florida Sun Sentinel, February 5, 2003).
Port Charlotte cardiologist Leonardo Victores, MD, left for Kansas in the face of medical liability premiums that were going to increase 100 percent. "He's moving to Kansas because that state has caps on malpractice awards," said colleague Mark Asperilla, MD. (Sun Herald, Jan. 1, 2003).
Despite having no malpractice claims or disciplinary actions on his record, Lakeland OB/GYN John Kaelber, MD, was forced to close his practice and leave the state in the wake of insurance premiums that doubled. (Lakeland Ledger, Nov. 21, 2002).
More than 50 Bradenton patients had to postpone elective surgeries and more than 100 office visits were canceled because two physicians were unable to obtain liability insurance. The insurer may leave the state altogether. (Bradenton Herald, Jan. 24, 2003).
After recently receiving notice of a premium spike coming in July 2002, Vladimir Grnja, MD, decided that he would "go bare" and drop all medical liability insurance coverage. Rates for the Hollywood, FL radiologist were to rise to $112,000 from $35,000 a year (a 220% increase), mainly because of litigation over mammograms. "No doctor wants to go bare," said Dennis Agliano, MD, chairman of the Florida Medical Association's special task force on the Florida medical liability crisis. But with significant premium hikes in Florida for specialties like OB/GYN, neurosurgery, thoracic surgery, radiology and even primary care, "some doctors have no choice," he says. Some neurosurgeons in South Florida, are paying a $200,000 premium for coverage of $250,000 per occurrence, making insurance practically meaningless. The Florida Medical Association reports that more than 1,000 doctors in Florida have no medical liability insurance. Doctors in West Virginia and Ohio are also reportedly going bare. (Modern Physician, April 1, 2002).

WEST VIRGINIA

General surgeon Gregory Saracco, MD, only 49 years old, was forced to borrow money twice in 2002 to pay $73,000 for his liability insurance. His premiums for 2003 are expected to rise to $100,000. He is considering leaving West Virginia and while he has taken time away from his practice this year to decide what his options are, he said "my job is to help people-I couldn't drive past an accident on the road and not stop. I don't know any doctor that could." (Associated Press, Jan. 2, 2003).
Although orthopedic surgeon George Zakaib, MD, was raised and went to school in Charleston, WV, he and his family left because of the state's medical liability crisis. Dr. Zakaib's premiums had increased to $80,000 plus $94,000 in "tail" coverage. (Charleston Daily Mail, July 27, 2002).
Fourth-year medical school student Jennifer Knight isn't sure she'll stay in West Virginia. The Charleston Area Medical Center says fewer medical students are applying to its residency programs, and fewer students are applying to Marshall University's medical school. "I think the problem is, we have too many frivolous lawsuits," said Ms. Knight. (Sunday Gazette-Mail, Nov. 24, 2002).

NEW JERSEY

A multi-physician practice in Teaneck, NJ was forced to layoff employees and reduce the number of deliveries it performed because of professional liability insurance premium increases of more than 120 percent. "All of my colleagues are experiencing the same pressures," said George Ajjan, MD (Bergen Record, May 22, 2002).
One out of every four hospitals-nearly 27 percent-has been forced to increase payments to find physicians to cover Emergency Departments. Physicians are increasingly reluctant to take on such assignments because of the greater liability exposure. Hospitals report that more and more physician specialties are being hit by the crisis. While a previous New Jersey Hospital Association survey in March 2002 found that OB/GYNs and surgeons were primarily affected, the new survey finds a deepening impact for neurologists/neurosurgeons, radiologists, orthopedists, general practitioners and emergency physicians. (New Jersey Hospital Association, Jan. 28, 2003 news release).
"We have as much to lose as they have," said Joan Hamilton, a patient who attended a recent rally in New Jersey in support of her physician. (Bergen Record, Oct. 6, 2002).

OTHER STATES

Liability costs for Texas physicians skyrocketed as much as 300 percent in some regions and for some specialties. As a result, there is only one neurosurgeon serving 600,000 people in the McAllen area. In the past two years, four South Texas patients with head injuries died before they could be flown out of the area for medical attention. As reported in a July 10, 2002, article in The Courier, a community family practice clinic in Conroe (just north of Houston) was recently forced to turn away half of its normal patient load because its liability insurance provider would not provide coverage while "highly lawsuit-risky obstetrics training was conducted."
In Nevada more than 30 private-practice OB/GYNs have left the state in 2002 and another 20 are poised to leave in 2003. About half of the OB/GYNs in the state are actively interviewing for positions out of state. "Right now it's almost impossible to recruit an obstetrician in Las Vegas," said University Medical Center obstetrician, Warren Volker, MD. (Las Vegas Sun, Sept. 27, 2002). Long-time obstetrician, Frieda Fleischer, MD, gave up obstetrics because her premiums rose from $30,000 annually to $80,000. "So far, I've had about 40 pregnant patients to refer elsewhere and it's been tough." Fleischer's office manager, Dawna Gunning adds, "What do you do when you have patients coming to your door crying and saying they cannot find a doctor and you've called every colleague?" (Las Vegas Review Journal, Jan. 10, 2003). The story of a woman who had to wait six months to have suspicious lumps removed from her uterus and ovaries because she couldn't get an appointment for the surgery illustrates that pregnant women are not the only patients affected by the exodus of Las Vegas obstetricians in recent months. (See, Las Vegas Review Journal, Nov. 5, 2002).
Obstetricians in Mississippi worry about what is going to happen to their patients who face longer trips to the hospital while already in labor. Women who used to walk or make a short drive for both prenatal visits and delivery now face a 45-minute drive. Of the seven doctors in Kosciusko that were practicing obstetrician/gynecologists last year, three will still be delivering babies by January. Right now, pregnant women who are considered high-risk, such as someone with diabetes, can't be treated at the Kosciusko Medical Clinic because it is too risky for physicians. (The Clarion-Ledger, Aug. 26, 2002.). Neurologist Terry Smith, MD said he has applied with 14 companies, and Medical Assurance is his last hope to find coverage before his current policy expires on Aug. 4. His premium will go from $55,000 a year to potentially $150,000 with a $132,000 tail to his old insurer. "I'm looking at writing a check for $300,000," said Smith, who does brain surgery at three hospitals in Jackson and Harrison counties. (Associated Press, July 11, 2002).
Rural families in John Day, Hermiston, and Roseburg counties, Oregon have either lost obstetric care or have seen services drastically reduced. (The Business Journal of Portland, Jan. 10, 2003). Only by dropping obstetrics were two Hermiston physicians able to afford their liability insurance premiums. "It's something you don't like to tell patients," said Doug Flaiz, MD. (The Oregonian, Oct. 29, 2002). "No one with $100,000 in debt from medical school wants to start a practice in a place where they could find themselves completely broke and having to pick up and go somewhere else to start all over again," said Rosemari Davis, CEO of Willamette Valley Medical Center, who has seen three of her center's family practitioners stop delivering babies. (The News Register, Jan. 28, 2003).
A 10-physician OB/GYN group in Columbia, South Carolina had to take out a $400,000 loan this year to continue to provide OB services and pay malpractice premiums. In rural Oconee County, just four doctors deliver babies now, down from 11 physicians one year ago. A family practice group in Seneca was forced to drop OB coverage for four of their six physicians because of skyrocketing premiums. There are currently a total of four physicians in Seneca treating pregnant women. A solo practitioner practicing geriatrics in Charleston has had to quit treating patients in nursing homes because of high premiums.

THE PRACTICAL SOLUTION

The AMA recognizes that injuries due to negligence do occur in a small percentage of health care interactions, and that they can be as devastating or worse to patients and their families than injury due to natural illness or unpreventable accident. When injuries occur and are caused by a breach in the standard of care, the AMA believes that patients are entitled to prompt and fair compensation.

This compensation should include, first and foremost, full payment of all out of pocket "economic" losses. The AMA also believes that patients should receive reasonable compensation for intangible "non-economic" losses such as pain and suffering and, where appropriate, the right to pursue punitive damages.

Unfortunately, our medical liability litigation system is neither fair nor cost effective in making a patient whole. Transformed by high-stakes financial incentives, it has become an increasingly irrational "lottery" driven by open-ended non-economic damage awards. A 2002 study by Tillinghast-Towers Perrin shows that our tort system, in general, is an extremely inefficient mechanism for compensating claimants-returning less than 45 cents on the dollar to claimants and only 20 cents of tort cost dollars to compensate for actual economic losses. This study also reveals that the cost of our tort system is significantly higher than other countries and almost twice the average.

To ensure that all patients who have been injured through negligence are fairly compensated, the AMA believes that Congress must pass fair and reasonable reforms to our medical liability litigation system that have proven effective. Toward this end, we strongly urge Congress to pass H.R. 5, the "Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2003," a bipartisan bill that would bring balance to our medical liability litigation system. We applaud Representative Greenwood (R-PA) and the other 65 Republican and Democrat original cosponsors of the HEALTH Act for championing this bill in the 108th Congress.

The major provisions of the HEALTH Act would benefit patients by:
Awarding injured patients unlimited economic damages (e.g., past and future medical expenses, loss of past and future earnings, cost of domestic services, etc.);
Awarding injured patients non-economic damages up to $250,000 (e.g., pain and suffering, mental anguish, physical impairment, etc.), with states being given the flexibility to establish or maintain their own laws on damage awards, whether higher or lower than those provided for in this bill;
Awarding injured patients punitive damages up to two times economic damages or $250,000, whichever is greater;
Establishing a "fair share" rule that allocates damage awards fairly and in proportion to a party's degree of fault; and
Establishing a sliding-scale for attorneys' contingent fees, therefore maximizing the recovery for patients.

These reforms are not part of some untested theory-they work. The major provisions of the HEALTH Act are based on the successful California law known as MICRA (Medical Injury Compensation Reform Act of 1975). MICRA reforms have been proven to stabilize the medical liability insurance market in California-increasing patient access to care and saving more than $1 billion per year in liability premiums-and have reduced the time it takes to settle a claim by 33 percent. MICRA is also saving California from the current medical liability insurance crisis brewing in many states that do not have similar reforms. In fact, according to MLM, as discussed above, the gap between medical liability insurance rates in California and those in the largest states that do not limit non-economic awards is substantial and growing.

MICRA-type reforms are effective, especially at controlling non-economic damages. Several economic studies substantiate this point. One study looked at several types of reforms and concluded that capping non-economic damages reduced premiums for general surgeons by 13% in the year following enactment of MICRA, and by 34% over the long term. Similar results were shown for premiums paid by general practitioners and OB/GYNs. It was also shown that caps on non-economic damages decrease claims severity (Zuckerman et al. 1990).

Another study published in the Journal of Health Politics, Policy and Law concluded that caps on non-economic damages reduced insurer payouts by 31%. Caps on total damages reduced payouts by 38% (Sloan, et al. 1989). Another study concluded that states adopting direct reforms experienced reductions in hospital expenditures of 5% to 9% within three to five years. If these figures are extrapolated to all medical spending, a $50 billion reduction in national health spending could be achieved through such reforms (Kessler and McClellan, Quarterly Journal of Economics, 1997).

Further, as discussed above, a 2002 Congressional Budget Office study on H.R. 4600 (107th Congress) asserts caps on non-economic damages have been extremely effective in reducing the severity of claims and medical liability premiums. Conversely, a 1996 American Academy of Actuaries study shows that medical liability costs rose sharply in Ohio after the Ohio Supreme Court overturned a liability reform law in the 1990s that set limits on non-economic damages. (Ohio recently enacted a new liability reform law.)

Furthermore, three-quarters of Americans understand the detrimental effect that excess litigation has on our health care system. A 2002 survey conducted by Wirthlin Worldwide shows that the vast majority of Americans agree we need common sense medical liability reform. Among the findings:

71 percent of Americans agree that a main reason health care costs are rising is because of medical liability lawsuits.
78 percent say they are concerned about access to care being affected because doctors are leaving their practices due to rising liability costs.
73 percent support reasonable limits on awards for "pain and suffering" in medical liability lawsuits.
More than 76 percent favor a law limiting the percentage of contingent fees paid by the patient.

These findings are consistent with the results of a Gallup poll released on February 5, 2003, show that 72% of those polled favor a limit on the amount patients can be awarded for pain and suffering.

CONCLUSION

Physicians and patients across the country realize more and more every day that the current medical liability situation is unacceptable. Unless the hemorrhaging costs of the current medical liability system are addressed at a national level, patients will continue to face an erosion in access to care because their physicians can no longer find or afford liability insurance. The reasonable reforms of the HEALTH Act have brought stability in those states that have enacted similar reforms.

By enacting meaningful medical liability reforms, Congress has the opportunity to increase access to medical services, eliminate much of the need for medical treatment motivated primarily as a precaution against lawsuits, improve the patient-physician relationship, help prevent avoidable patient injury, and curb the single most wasteful use of precious health care dollars-the costs, both financial and emotional, of health care liability litigation. The modest proposals in the HEALTH Act answer these issues head on and would strengthen our health care system.

The AMA appreciates the opportunity to testify on the adverse effect that our current medical liability litigation system imposes on patient access to health care and urges Congress to pass the HEALTH Act.

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